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What is Governance?: A working definition for governance Governance is the process and institutions by which authority in a country is exercised: (1) the process by which governments are selected, held accountable, monitored, and replaced; (2) the capacity of governments to manage resources efficiently, and to formulate, implement, and enforce sound policies and regulations; and, (3) the respect for the institutions that govern economic and social interactions among them
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The World Bank Institute Governance Team
Governance, Corruption and Poverty: Analytical and Empirical
approaches * The World Bank Institute Governance Team What is
Governance?: A working definition for governance
Governance is the process and institutions by which authority in a
country is exercised: (1) the process by which governments are
selected, held accountable, monitored, and replaced; (2) the
capacity of governments to manage resources efficiently, and to
formulate, implement, and enforce sound policies and regulations;
and, (3) the respect for the institutions that govern economic and
social interactions among them Operationalizing
Governance:Unbundling its Definition into Components thatcan be
measured, analyzed, and worked on Each of the 3 main components of
Governance Definition is unbundled into 2 subcomponents: Voice and
Accountability Political Stability and lack of Violence Quality
Regulatory Framework Government Effectiveness Control of Corruption
Rule of Law Governance and Poverty Nexus, I
Unsound economic/institutional policies due to vested interests
Distorted allocation of public expenditures/investments Low human
capital accumulation Elite corporate interests capture laws and
distort policymaking Absence of rule of law and property rights
Governance obstacles to private sector development Lower Investment
and Growth Lack of Health and Education Low human capital
accumulation Lower quality of education and health care Cont
Governance and Poverty Nexus, cont.
State capture by elite of government policies and resource
allocation Regressiveness of bribery tax on small firms and the
poor Regressiveness in public expenditures and investments Unequal
income distribution Briber imposes regressive tax and impairs
access and quality of basic services for health, education, and
justice Political capture by elites of access to particular
services Poor have smaller share in growth Impaired access to
public services Control of Corruption: Aggregate Indicator
(selected countries from 155 worldwide, for illustration, based on
1998 research data*) Good Corruption Control Margin of Error
Corruption Level POOR GOOD Source:Governance Matters, PRWP 2196 by
Kaufmann, Kraay and Zoido. Application of Rule of Law Varies by
Region
(based on aggregation of surveys/polls *) High Index of Rule of Law
Appli- cation Low Index OECD East Middle South Eastern Latin Sub-
Former Asia East Asia Europe America Saharan Soviet Africa Union
Note:Regional Averages shown for discussion purposes, and hide
large intra-regional variation in each case.Thin vertical line
reflects estimated margin of error.Source: Kaufmann, Kraay and
Zoido-Lobaton (1999)."Aggregating Governance Indicators" and
"Governance Matters" PWRP 2195 and The Dividend of Good
Governance
Infant Mortality and Corruption 10 20 30 40 50 60 70 80 90 Weak
Average Good Control of Corruption x Development Dividend 2,000
4,000 6,000 8,000 10,000 12,000 Weak Average Good Regulatory Burden
x Development Dividend Per Capita Income and Literacy and Rule of
Law 25 50 75 100 Weak Average Good Rule of Law x Development
Dividend Per Capita Income and Voice and Accountability 1000 2000
3000 4000 5000 6000 7000 8000 9000 10000 Weak Average Strong x
Development Dividend Note : The bars depict the simple correlation
between good governance and development outcomes.The line depicts
the predicted value when taking into account the causality effects
(Development Dividend) from improved governance to better
development outcomes. For data and methodological details visit
Incomes vs. Government Effectiveness Incomes vs. Control of
Corruption Voice, Accountability and Civil Liberties Matter for
Development
Source: KKZ 1999 Corruption is associated with absence of Civil
Liberties
High Corruption Low Not Free Partly Free Free Based on averages of
data from 160 countries. Civil Liberties Control of Graft and
Freedom of the Press
High Control of Graft [kkz] r =.68 Low Low High Freedom of the
Press (Freedom House) Salient Features of New Governance Diagnostic
Tools
Multi-pronged surveys of:households, firms and public
officials[triangulation] Experiencial questions (vs.
opinions/generic) Specially designed and tested closed questions
Conceptual framework: Incentive Structure behind Governance; focus
on development Rigorous technical requirements in implementation
Local Institution Implements, with WB Collaboration Recognizing
Multidimensionality of Governance Focus on Service Delivery:Input
for Action and Change Romania: Disproportionally Negative Impact on
the Poor
Key point:the surveys not only reveal the incidence and extent of
corruption, but allow us to examine the direct costs to different
groups in society.This research demonstrates the highly unequal
impact of so-called "gratuity payments" in Romania.Though they are
often seen as a quasi-market pricing mechanism, they have an impact
on the poor's access tohealth services. Corruption as a regressive
tax on the household (% of income paid in bribes, as reported by
all users that requested public services) Corruption as a
regressive tax: small firms pay disproportionally in bribes (% of
gross monthly revenue paid in bribes) Citizen Voice Improves
Accessibility of Public Services to the Poor (Bolivia diagnostic
results, 2000) Based on Bolivia Public Officials Survey. The sample
of institutions includes 44 national, departmental, and municipal
agencies whichare a prior anticipated to be accessible to the poor
Citizen Voice Helps Control Bribery (Bolivia diagnostic results,
2000)
Based on 90 national, departmental, and municipal agencies covered
in the Bolivia Public Officials Survey. Transparency within
Government Agencies Increases Their Poverty Reduction Impact in
Bolivia
Based on Bolivia Public Officials Survey. The sample of
institutions includes 50 national, departmental, and municipal
agencies whichare a prior anticipated to have a major impact on
poverty reduction. Public Officials evaluation of effectiveness and
access to the Poor by their public sector agencies [Preliminary
results on Governance-Poverty nexus, Bolivia] Public officials
themselves report that only one-half of public services they
provide are accessible to the poor Performance of re-distributive
public agencies: Mixed Results; they do not perform better than
others in terms of providing access to the poor Limited public
service accessibility to the poor at local level is associated with
high bribery in local administration Bribery in provision of public
services reduces accessibility to the poor Bribery does not
increase public service quality Bribery increases cost of public
services Pro-Poor Public Officials: Who are they?
[Illustrative results from one country diagnostic] Determinants of
pro-poverty reduction reporting by public officials (Initial
results from multivariate econometric analysis, Bolivia data):
Municipality/Locality plays key role: significant differences
across localities College-educated officials report higher
pro-poverty alleviation impact Public officials in pro-poor
institutions do not report higher poverty alleviation impact Public
officials in better run, transparent, less corrupt agencies do
report enhanced pro-poor impact Lower Public Sector Salaries do not
Increase Bribery in Ecuador
15.5% 15% Bribe* = 3MS 12% 8.4% 9% 7.7% Bribe* Bribe* = 6% = 0. 2MS
0. 5MS 3% 0% Monthly Salary Monthly Salary Monthly Salary Less than
3MS Between 3 & 13 MS More than 13 MS * Average bribe to public
officials Indonesia (preliminary): Public Sector Corruption in
Indonesia Is Not Caused by Low Government Pay(Indonesian Public
Official Survey Very Preliminary Draft) Based on 36 public agencies
covered in the Indonesia Public Officials Survey. Indonesia
(preliminary):Agencies Providing for Citizen Voice Exhibit Less
Bribery(Indonesian Public Official Survey Very Preliminary Draft)
Based on 36 public agencies covered in the Indonesia Public
Officials Survey. Indonesia (preliminary): Bribery is More
Prevalent in Resource-Rich Public Agencies(Indonesian Public
Official Survey Very Preliminary Draft) Based on 36 public agencies
covered in the Indonesia Public Officials Survey. Parliamentary
legislation Central Bank Influence
Understanding the Politics is key to Assess Misgovernace, grand
corruption, and its incidence on socio-economic variables:State
Capture Prevails in many countries 50 % 45 % 40 % 35 % 30 % %of
Firms affected by state capture 25 % 20 % 15 % 10 % % 5 Hungary
Estonia Russia Azerbaijan Adverse Impact of Purchases of:
Parliamentary legislation Decrees Central Bank Influence
Prioritization: Strategy will differ (illustrative)
A.Little Political Will Civil Society and Data Power/Diagnostics:
Voice/ Accountable Leadership Donor Public Procurement ADRs in the
Judiciary Delicensing Process NGO/participatory drive (to improve
public service delivery) B.With Political Will Public Procurement
and Budgetary Reforms pro-poor Judicial reforms Civil Service
Reform Police -- Accountability Collective Action with Civil
Society & Private Who Should take the lead in a National
Governance/Anticorruption Program?
Percentage of Respondents A-C: Anti-Corruption A simple Formula
synthesizing Governance/Anticorruption:
National Governance:Challenges in Integrating Anti-Corruption Into
Institutional Change A simple Formula synthesizing
Governance/Anticorruption: IG and AC = KI + LE + CA Improving
Governance and Anti-Corruption= = Knowledge/Info.Data
...+Leadership (incl. Political) Collective Action (change) Overall
Corruption Over Time
(Selected Countries; ICRG index, rescaled 0-10) 10 High corruption
Indonesia El Salvador 8 Russia Indonesia 6 Russia 4 Firms Senior
Management Time Spent with Officials Do the bribes paid by firms
make life easier for them?Not necessarily; as it turns out, firms
that pay more bribes end up spending more (not less) time with
bureaucrats. In Russia, various estimates suggest that senior
managers/owners of SMEs end up spending between percent of their
time negotiating with officials. Excessive control by officials
over enterprise translates into excessive regulations, inordinate
amounts of time spent by the enterprises owner with bureaucrats,
and bribery. Our evidence suggests a very close association
throughout the world between the extent of bribery and (higher)
senior management time wasted with officials on licenses, as well
as a close association between bribery and higher cost of investing
and cost of capital for firms. Thus, we find no empirical support
for the traditional grease argument, which suggested that petty
bribery can help oil the squeaky wheels of commerce in developing
countries.To the contrary, the business community ends up losing by
bribing. El Salvador Poland 2 Poland Low corruption Finland Finland
1992 1993 1994 1995 1996 1997 1998 7 Governance and Poverty:
Summing Up
Governance broader concept than corruption Misgovernance results in
poverty through various channels reduced growth being a key one
Interplay between voice, accountability, rule of law and
anti-corruption for attacking poverty is key Power of Data for
analysis, reform formulation, and collective action: i)
Cross-Country Indicators & analysis; ii) Regional Surveys, and
iii) in-depth country diagnostics. Focus on varying quality of
institutions within each country enormous variation (e.g.
Parliaments) Misgovernance in extremis:Failed States Resolute
collective action can make a difference, and in 5-10 years IG = K.I
+ LE + CA Visit: Data Presented for Analysis and informing Policy
Advise, not for Precise Rankings
The data contained in this presentation originates from a large
variety of external sources as well as World Bank surveys and
research.Governance data is typically subject to a significant
margin of error. The purpose is therefore not to present precise
comparative rankings across countries, but instead to illustrate
characteristics of governmental and corporate performance in order
to assist in drawing implications for action.No ranking of
countries is intended in presenting these research-oriented
empirical results from these external sources. Further details and
data, visit:
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